According to statistics from the American Immigration Council, more than one in five Florida residents is an immigrant, while one in eight residents are native-born in the United States with at least one immigrant parent.
Additionally, National Association of Realtors (NAR) statistics provides that the Sunshine State has the largest number of foreign investors in real estate nationwide. As it is plain to see, Florida is one of the most sought-after destinations for foreign real estate investors.
If you want to invest in US real property as a foreigner, this article provides a guide for foreign investors in Florida real estate in 2021.
Does Purchasing a US Property Changes Someone’s Immigration Status?
Any foreign investor is free to purchase real property in Florida without any intervention from government agencies. However, it is fundamental to note that buying a US property does not offer special privileges or changes the legal status of any foreign investor. If a foreign investor wants to stay in the United States for longer than allowed by the standard visa, the only way is to consult with an immigration attorney to apply for another visa with US Citizenship and Immigration Services (USCIS).
Foreign Investment in Florida Real Estate – Buying All-Cash or Financing?
Most foreign buyers pay for their properties using cash only, as it is hard to obtain mortgage financing as a foreign national in the US due to the lack of credit history. Federal law requires that buyers must report all cash transactions over $10,000 to the US government.
Additionally, some counties in Florida have local rules for specific types of transactions. For instance, all-cash transactions of over $1 million for real estate in Miami-Dade County require an official declaration to prevent money laundering.
Generally, factors like title search, escrow, insurance, and other legal aspects are under the buyer’s responsibility in Florida. Depending on the transaction, the buyer may be responsible for registration fees. Foreigners can use a Power of Attorney authorizing an expert real estate attorney to represent them at the closing of a real estate transaction, as Florida law does require them to be physically present when signing the contract.
Foreign Investment in Florida Real Estate – Rental Property Investment
Foreign citizens who purchase Florida real estate to rent it for profit must deal with rental income taxation. In many cases, foreigners buy rental property under a legal entity (e.g., a limited liability company) to optimize tax deductions. Foreign investors must be aware of all guidelines provided by Internal Revenue Service (IRS), which administers and enforces US federal tax laws.
The IRS is responsible for determining whether or not a foreign investor meets the requirements to be considered as a US resident for tax purposes. Thus, the IRS utilizes a Substantial Presence test to determine the number of days an investor has been physically present on American soil. A foreign investor is considered a tax resident if he/she has been physically present for more than 183 in US soil during the last three years and at least 31 days of the current year.
Some countries enjoy tax treaties with the United States government, which gives their nationals special conditions when investing in Florida real estate.
Foreign Investment in Florida Real Estate – FIRPTA Regulations
The FIRPTA tax applies when a foreigner is selling an interest in real property in the United States.
The percentage withheld under FIRPTA varies according to each property’s gross sale price. For properties with a gross sale price over $1,000,000, the amount withheld under FIRPTA is 15% of the gross sale price.
If a property’s gross sale price is between $300,000 and $1,000,000, and the buyer uses the property as his/her primary residence, the percentage withheld is 10%.
Not only are foreign investors with full ownership of real property exposed to FIRPTA, but also investors with an interest in real property such as fee ownership, co-ownership, leaseholds, and fractional interests.
After withholding the required percentage of the gross sale price, buyers must forward the funds with the required forms to the IRS, within 20 days after the closing date. Yet, there are exemptions from FIRPTA taxation (e.g., if the property’s sale price is less than $300,000).
For further guidance on FIRPTA regulations and feasible manners to avoid taxation in Florida, seek guidance from an expert lawyer from Jurado and Associates, P.A.
Foreign Investment in Florida Real Estate – Waste no Time and Money with Uncertainty
If you want an expert legal advisor to invest in Florida real estate like a professional, call Attorney Romy B. Jurado today at (305) 921-0976 or send an email at [email protected] scheduling a consultation.